FreightCar America(RAIL) - 2025 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial information for the company, including statements, notes, and management's analysis Item 1. Financial Statements. This section presents the unaudited condensed consolidated financial statements of FreightCar America, Inc. for the period ended March 31, 2025, including balance sheets, statements of operations, comprehensive income (loss), mezzanine equity and stockholders' deficit, and cash flows, along with detailed notes explaining accounting policies and significant financial items Condensed Consolidated Balance Sheets (Unaudited) Presents the unaudited condensed consolidated balance sheets as of March 31, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets (Selected Items, in thousands) | Item | March 31, 2025 | December 31, 2024 | Change | | :----------------------------------- | :------------- | :---------------- | :----- | | Total assets | $250,468 | $224,216 | +11.7% | | Total liabilities | $347,867 | $374,489 | -7.1% | | Total stockholders' deficit | $(97,399) | $(150,273) | +35.2% | | Cash, cash equivalents and restricted cash equivalents | $54,084 | $44,450 | +21.7% | | Accounts receivable, net | $18,361 | $12,506 | +46.8% | | Inventories, net | $79,109 | $75,281 | +5.1% | | Warrant liability | $83,431 | $136,319 | -38.7% | Condensed Consolidated Statements of Operations (Unaudited) Presents the unaudited condensed consolidated statements of operations for the three months ended March 31, 2025 and 2024 Condensed Consolidated Statements of Operations (Selected Items, in thousands) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (YoY) | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Revenues | $96,290 | $161,058 | -40.2% | | Cost of sales | $81,896 | $149,655 | -45.3% | | Gross profit | $14,394 | $11,403 | +26.2% | | Selling, general and administrative expenses | $10,523 | $7,493 | +40.4% | | Operating income | $3,871 | $3,910 | -1.0% | | Interest expense | $(4,336) | $(2,391) | +81.3% | | Gain (loss) on change in fair market value of Warrant liability | $52,888 | $(15,653) | N/A | | Net income (loss) | $50,448 | $(11,571) | N/A | | Net earnings (loss) per common share - basic | $1.54 | $(0.54) | N/A | | Net earnings (loss) per common share - diluted | $1.52 | $(0.54) | N/A | Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) Presents the unaudited condensed consolidated statements of comprehensive income (loss) for the three months ended March 31, 2025 and 2024 Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (loss) | $50,448 | $(11,571) | | Unrealized gain on foreign currency derivatives | $944 | $207 | | Pension and post-retirement liability adjustments | $32 | $35 | | Comprehensive income (loss) | $51,424 | $(11,329) | Condensed Consolidated Statements of Mezzanine Equity and Stockholders' Deficit (Unaudited) Presents the unaudited condensed consolidated statements of mezzanine equity and stockholders' deficit for the three months ended March 31, 2025 - Total stockholders' deficit improved significantly from $(150,273) thousand as of December 31, 2024, to $(97,399) thousand as of March 31, 2025, primarily due to net income and other comprehensive income[9][17] - The Series C Preferred Stock, previously classified as mezzanine equity, was fully redeemed on December 31, 2024, resulting in zero shares issued and outstanding as of March 31, 2025[17][52] Changes in Stockholders' Deficit (Selected Items, in thousands) | Item | Three Months Ended March 31, 2025 | | :----------------------------------- | :-------------------------------- | | Balance, December 31, 2024 | $(150,273) | | Net income | $50,448 | | Other comprehensive income | $976 | | Stock-based compensation recognized | $1,940 | | Balance, March 31, 2025 | $(97,399) | Condensed Consolidated Statements of Cash Flows (Unaudited) Presents the unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2025 and 2024 Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash flows provided by (used in) operating activities | $12,794 | $(25,322) | | Net cash flows used in investing activities | $(330) | $(966) | | Net cash flows used in financing activities | $(2,830) | $(295) | | Net increase (decrease) in cash and cash equivalents | $9,634 | $(26,583) | | Cash, cash equivalents and restricted cash equivalents at end of period | $54,084 | $13,977 | - Operating cash flow significantly improved, turning from a net use of $25.3 million in Q1 2024 to a net provision of $12.8 million in Q1 2025, driven by changes in working capital including increases in accounts payable and customer deposits[20][98] Notes to Condensed Consolidated Financial Statements (Unaudited) Provides detailed explanations of the accounting policies and significant financial items presented in the financial statements Note 1 – Description of the Business Describes the company's core operations, products, services, and geographic locations - FreightCar America, Inc. designs and manufactures a wide range of railroad freight cars, provides railcar rebody and repair services, railcar conversion services, and supplies railcar parts primarily in North America[23] - The Company's facilities are located in Johnstown, Pennsylvania; Qingdao, People's Republic of China; and Castaños, Coahuila, Mexico[23] Note 2 – Basis of Presentation Outlines the accounting principles and interim financial reporting standards used in preparing the statements - The accompanying condensed consolidated financial statements are unaudited and prepared in accordance with GAAP and SEC rules for interim financial reporting, involving management estimates and assumptions[24] - The results for the three months ended March 31, 2025, are not necessarily indicative of the results to be expected for the full year[24] Note 3 – Revenue Recognition Details the company's revenue sources, recognition policies, and remaining performance obligations Revenues by Major Source (in thousands) | Revenue Source | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (YoY) | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Railcar sales | $90,100 | $155,597 | -42.1% | | Aftermarket sales | $6,116 | $5,330 | +14.7% | | Revenues from contracts with customers | $96,216 | $160,927 | -40.2% | | Leasing revenues | $74 | $131 | -43.6% | | Total revenues | $96,290 | $161,058 | -40.2% | - Customer deposits increased to $17,611 thousand as of March 31, 2025, from zero at December 31, 2024[26] - Remaining unsatisfied performance obligations with expected duration greater than one year were $81,321 thousand as of March 31, 2025[27] Note 4 – Segment Information Provides financial data broken down by the company's Manufacturing and Aftermarket operating segments - The Company operates in two reportable segments: Manufacturing (new railcar manufacturing, used railcar sales, major conversions/rebodies) and Aftermarket (railcar parts, services)[28] Segment Performance (Three Months Ended March 31, in thousands) | Segment | Metric | 2025 | 2024 | Change (YoY) | | :----------------------------------- | :----------------------------------- | :----- | :----- | :----------- | | Manufacturing | Revenues | $90,174 | $155,728 | -42.1% | | | Gross profit | $12,109 | $8,741 | +38.5% | | | Operating income | $11,752 | $8,278 | +42.0% | | Aftermarket | Revenues | $6,116 | $5,330 | +14.7% | | | Gross profit | $2,285 | $2,662 | -14.2% | | | Operating income | $1,719 | $2,191 | -21.5% | | Corporate | Operating loss | $(9,600) | $(6,559) | +46.4% | Segment Assets (in thousands) | Segment | March 31, 2025 | December 31, 2024 | | :----------------------------------- | :------------- | :---------------- | | Manufacturing | $179,230 | $165,702 | | Aftermarket | $10,776 | $11,014 | | Corporate | $59,673 | $46,361 | | Total operating assets | $249,679 | $223,077 | Note 5 – Fair Value Measurements Discusses the valuation methodologies and classifications for financial instruments, including warrant liability Recurring Fair Value Measurements (in thousands) | Liability | March 31, 2025 | December 31, 2024 | | :----------------------------------- | :------------- | :---------------- | | Warrant liability | $83,431 | $136,319 | | Foreign currency derivative liability | $452 | $1,396 | - The fair value of the Warrant liability and foreign currency derivative liability are both classified as Level 2 measurements[35][36] - Assets held for sale (triple hopper aggregate railcars) were valued at $629 thousand (Level 3) as of December 31, 2024, and were sold in April 2025[35][37] Note 6 – Restricted Cash Explains the nature and changes in restricted cash balances, primarily for collateral purposes Restricted Cash Balances (in thousands) | Item | March 31, 2025 | December 31, 2024 | | :----------------------------------- | :------------- | :---------------- | | Restricted cash from customer deposit | $282 | $282 | | Restricted cash to collateralize standby letters of credit | $300 | $300 | | Restricted cash to collateralize foreign currency derivatives | $- | $3,300 | | Total restricted cash and restricted cash equivalents | $582 | $3,882 | - Total restricted cash decreased significantly from $3,882 thousand to $582 thousand, primarily due to the release of cash previously held to collateralize foreign currency derivatives[39] Note 7 – Inventories Details the composition and changes in inventory balances, including raw materials and finished goods Inventories, Net (in thousands) | Item | March 31, 2025 | December 31, 2024 | | :----------------------------------- | :------------- | :---------------- | | Raw materials | $54,373 | $47,340 | | Work in process | $13,666 | $9,323 | | Finished railcars | $5,199 | $12,640 | | Parts inventory | $5,871 | $5,978 | | Total inventories, net | $79,109 | $75,281 | - Total inventories, net, increased by 5.1% from $75,281 thousand to $79,109 thousand, driven by increases in raw materials and work in process, while finished railcars decreased[40] Note 8 – Product Warranties Outlines the company's product warranty reserve and the activity related to warranty provisions and payments Changes in Warranty Reserve (in thousands) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Balance at the beginning of the year | $2,389 | $1,602 | | Current year provision | $64 | $169 | | Reductions for payments, costs of repairs and other | $(225) | $(173) | | Adjustments to prior warranties | $(66) | $(130) | | Balance at the end of the period | $2,162 | $1,468 | - The warranty reserve decreased from $2,389 thousand at the beginning of the year to $2,162 thousand by March 31, 2025, with a lower current year provision compared to the prior year[41] Note 9 – Debt Financing and Credit Facilities Describes the company's term loan and asset-backed lending facilities, including terms and compliance - The Company entered into a $115,000 thousand Term Loan agreement on December 31, 2024, maturing December 31, 2028, with an interest rate of 10.3% as of March 31, 2025, with proceeds used to redeem Preferred Stock[42][43] - A new $35,000 thousand Asset-Backed Lending (ABL) revolving credit facility was established on February 12, 2025, maturing February 12, 2030, bearing interest at 6.3% as of March 31, 2025[44][46] - The Company was in compliance with all covenants for both the Term Loan and ABL as of March 31, 2025, with $8,779 thousand borrowing availability under the ABL[42][45][46] Note 10 – Warrants Explains the company's outstanding warrants, their classification as a liability, and fair value remeasurement - The Company has multiple warrants (2020, 2021, 2022, 2023) outstanding to OC III LFE II LP and affiliates, classified as a liability and subject to fair value remeasurement[48][49][50] Warrant Fair Value (in thousands) | Item | March 31, 2025 | December 31, 2024 | | :----------------------------------- | :------------- | :---------------- | | Fair value of the Warrant | $83,431 | $136,319 | - The fair value of the Warrant decreased by 38.7% from $136,319 thousand at December 31, 2024, to $83,431 thousand at March 31, 2025, with the change reported in the consolidated statements of operations[50] Note 11 – Mezzanine Equity Details the full redemption of Series C Preferred Stock, previously classified as mezzanine equity - The Series C Preferred Stock, previously classified as mezzanine equity, was fully redeemed on December 31, 2024, using proceeds from the Term Loan[51][52] - The total redemption price was $113,275 thousand, including $27,863 thousand in accrued dividends[52] Note 12 – Accumulated Other Comprehensive Income Presents the components and changes in accumulated other comprehensive income, including pension and derivatives Components of Accumulated Other Comprehensive Income (in thousands) | Item | March 31, 2025 | December 31, 2024 | | :----------------------------------- | :------------- | :---------------- | | Unrecognized pension income, net of tax | $2,149 | $2,117 | | Unrealized loss on foreign currency derivatives | $(452) | $(1,396) | | Total | $1,697 | $721 | - Accumulated other comprehensive income increased from $721 thousand to $1,697 thousand, primarily due to a reduction in unrealized loss on foreign currency derivatives[54] Note 13 – Stock-Based Compensation Reports on the stock-based compensation expense recognized and unearned compensation for awards - Total stock-based compensation recognized was $1,940 thousand for Q1 2025, a significant increase from $760 thousand in Q1 2024[55] - As of March 31, 2025, there was $1,911 thousand of unearned compensation expense for restricted stock awards (27 months remaining) and $1,953 thousand for time-vested stock options (26 months remaining)[55] Note 14 – Employee Benefit Plans Describes the company's frozen defined benefit pension plan and related net periodic benefit costs - The Company maintains a frozen defined benefit pension plan, with net periodic benefit cost of $97 thousand in Q1 2025 (vs. $95 thousand in Q1 2024)[57][58] - No contributions were made to the Plan in Q1 2025 or Q1 2024, but a contribution may be required in 2025[58] Note 15 – Derivatives Explains the company's use of foreign currency forward contracts as cash flow hedges - The Company uses foreign currency forward contracts as cash flow hedges to mitigate foreign currency rate exposure for Mexican Peso denominated expenses[61][62] Foreign Currency Derivatives (in thousands) | Item | March 31, 2025 | December 31, 2024 | | :----------------------------------- | :------------- | :---------------- | | Notional Amount | $21,136 | $8,780 | | Fair Value (liability) | $452 | $1,396 | | Realized Loss (recognized in Cost of Sales) | $591 | $525 | - The notional amount of foreign currency derivatives increased significantly from $8,780 thousand to $21,136 thousand[64] Note 16 – Commitments and Contingencies Discusses the company's involvement in various litigation matters and other commitments - The Company is involved in various litigation matters, including intellectual property, warranty, and repair claims, but does not believe they will have a material adverse effect on its financial position, results of operations, or cash flows[65] Note 17 – Earnings (Loss) Per Share Provides details on the calculation of basic and diluted earnings per share for the periods presented Earnings (Loss) Per Share Data | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (loss) available to common stockholders - basic | $48,610 | $(15,952) | | Net income (loss) available to common stockholders - diluted | $50,448 | $(15,952) | | Weighted average common shares outstanding – basic | 31,649,133 | 29,580,182 | | Weighted average common shares outstanding – diluted | 33,285,446 | 29,580,182 | | Net earnings (loss) per common share - basic | $1.54 | $(0.54) | | Net earnings (loss) per common share - diluted | $1.52 | $(0.54) | - Basic and diluted EPS significantly improved from a loss of $(0.54) in Q1 2024 to a gain of $1.54 and $1.52, respectively, in Q1 2025[66][87] Note 18 – Related Parties Reports on transactions, payments, and balances with related parties, including the Gil Family - Payments to the Gil Family (related to steel fabrication, rent, supplies, trucking, royalties) decreased from $7,647 thousand in Q1 2024 to $4,607 thousand in Q1 2025[68] - Sales of specialty parts supplies to Commercial Specialty Truck Holdings, LLC (CSTH), a related party, decreased from $208 thousand in Q1 2024 to $66 thousand in Q1 2025[69] Related Party Balances (in thousands) | Item | March 31, 2025 | December 31, 2024 | | :----------------------------------- | :------------- | :---------------- | | Related party asset (in prepaid expenses and other current assets) | $890 | $959 | | Related party accounts payable (in other current liabilities) | $2,613 | $2,693 | Note 19 – Income Taxes Details the income tax provision (benefit) and effective tax rate, explaining key drivers Income Tax Provision (Benefit) and Effective Rate | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Income tax provision (benefit) | $1,836 | $(2,577) | | Effective income tax rate | 3.5% | 18.2% | - The effective tax rate of 3.5% in Q1 2025 is lower than the 21% U.S. statutory rate primarily due to increased U.S. forecasted earnings with limited tax expense (due to a full U.S. valuation allowance) and earnings from international jurisdictions (predominantly Mexico) taxed at a higher rate[72][73] - The company reported a significant swing from a net loss of $11.6 million in Q1 2024 to a net income of $50.4 million in Q1 2025, primarily driven by a gain on the change in fair market value of Warrant liability[12][87] - Net cash provided by operating activities improved substantially to $12.8 million in Q1 2025 from a net cash used of $25.3 million in Q1 2024[20][98] Key Financial Highlights (Q1 2025 vs. Q1 2024) | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | Change (YoY) | | :----------------------------------- | :--------------------- | :--------------------- | :----------- | | Revenues | $96,290 | $161,058 | -40.2% | | Gross Profit | $14,394 | $11,403 | +26.2% | | Operating Income | $3,871 | $3,910 | -1.0% | | Net Income (Loss) | $50,448 | $(11,571) | N/A | | Basic EPS | $1.54 | $(0.54) | N/A | | Diluted EPS | $1.52 | $(0.54) | N/A | | Net Cash from Operating Activities | $12,794 | $(25,322) | N/A | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations for the three months ended March 31, 2025, compared to the prior year, discussing key performance drivers, segment results, liquidity, and capital resources CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Highlights the inherent risks and uncertainties associated with forward-looking statements in the report - The report contains forward-looking statements subject to potential risks and uncertainties, including cyclical business nature, adverse economic conditions, fluctuating raw material costs, and regulatory changes[74] - Investors should not rely on forward-looking statements as a prediction of actual results, and the company disclaims any duty to update them unless legally required[74] OVERVIEW Provides a general description of the company's business, segments, and recent order activity - FreightCar America is a diversified manufacturer of railcars and components, with Manufacturing and Aftermarket segments[75][76] - Total net railcar orders received in Q1 2025 were 1,250 units (all new railcars), a significant increase from 384 units in Q1 2024[79] Backlog of Unfilled Orders | Metric | March 31, 2025 | December 31, 2024 | | :----------------------------------- | :------------- | :---------------- | | Total backlog (units) | 3,337 | 2,797 | | Estimated sales value of backlog | $318 million | $267 million | RESULTS OF OPERATIONS Analyzes the company's financial performance, including revenues, gross profit, and net income Revenues Discusses the drivers behind changes in consolidated and segment revenues Consolidated Revenues (in millions) | Period | Revenues | | :----------------------------------- | :------- | | Three Months Ended March 31, 2025 | $96.3 | | Three Months Ended March 31, 2024 | $161.1 | - Consolidated revenues decreased by $64.8 million (40.2%) YoY, primarily due to a $65.5 million decrease in Manufacturing segment revenues, driven by lower railcar unit deliveries (710 units in Q1 2025 vs. 1,223 units in Q1 2024)[80] - Aftermarket segment revenues increased from $5.3 million to $6.1 million, reflecting higher parts sales volume[80] Gross Profit Analyzes the factors influencing consolidated and segment gross profit changes Consolidated Gross Profit (in millions) | Period | Gross Profit | | :----------------------------------- | :----------- | | Three Months Ended March 31, 2025 | $14.4 | | Three Months Ended March 31, 2024 | $11.4 | - Consolidated gross profit increased by $3.0 million (26.3%) YoY, primarily due to a $3.4 million increase in Manufacturing segment gross profit, reflecting a favorable product mix[81] - Aftermarket segment gross profit decreased by $0.4 million due to an unfavorable price mix[81] Selling, General and Administrative Expenses Examines the changes in SG&A expenses and their primary contributing factors Consolidated SG&A Expenses (in millions) | Period | SG&A Expenses | | :----------------------------------- | :------------ | | Three Months Ended March 31, 2025 | $10.5 | | Three Months Ended March 31, 2024 | $7.5 | - Consolidated SG&A expenses increased by $3.0 million (40.0%) YoY, primarily driven by increases of $1.4 million in legal expenses and $1.2 million in stock-based compensation expenses[82] - Corporate SG&A expenses increased from $6.5 million to $9.6 million, reflecting the aforementioned increases[82] Operating Income Reviews the consolidated and segment operating income performance and key influences Consolidated Operating Income (in millions) | Period | Operating Income | | :----------------------------------- | :--------------- | | Three Months Ended March 31, 2025 | $3.9 | | Three Months Ended March 31, 2024 | $3.9 | - Consolidated operating income remained stable YoY at $3.9 million, as favorable product mix in Manufacturing was offset by increased SG&A expenses[83] - Manufacturing segment operating income increased from $8.3 million to $11.8 million, while Aftermarket segment operating income decreased from $2.2 million to $1.7 million[83] Gain (Loss) on Change in Fair Market Value of Warrant Liability Explains the impact of changes in the fair value of the warrant liability on financial results Gain (Loss) on Warrant Liability (in millions) | Period | Gain (Loss) | | :----------------------------------- | :---------- | | Three Months Ended March 31, 2025 | $52.9 | | Three Months Ended March 31, 2024 | $(15.7) | - The company recorded a $52.9 million gain on the change in fair market value of Warrant liability in Q1 2025, a significant reversal from a $15.7 million loss in Q1 2024, driven by stock price fluctuations[85] Income Taxes Discusses the income tax provision (benefit) and the effective tax rate for the period Income Tax Provision (Benefit) (in millions) | Period | Income Tax | | :----------------------------------- | :--------- | | Three Months Ended March 31, 2025 | $1.8 | | Three Months Ended March 31, 2024 | $(2.6) | - The company recorded an income tax provision of $1.8 million in Q1 2025, compared to a benefit of $2.6 million in Q1 2024, primarily due to the mix of forecasted earnings in the U.S. and Mexico and permanent/discrete items[86] Net Income (Loss) Summarizes the overall net income (loss) and earnings per share performance Net Income (Loss) and EPS | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (loss) (in millions) | $50.4 | $(11.6) | | Basic net earnings (loss) per share | $1.54 | $(0.54) | | Diluted net earnings (loss) per share | $1.52 | $(0.54) | - Net income of $50.4 million in Q1 2025 represents a significant improvement from a net loss of $11.6 million in Q1 2024, leading to positive basic and diluted EPS[87] LIQUIDITY AND CAPITAL RESOURCES Assesses the company's ability to meet its short-term and long-term financial obligations and funding needs Warrant Refers to the details of the company's outstanding warrants and their terms - The Company has warrants outstanding to OC III LFE II LP and affiliates, exercisable under terms described in Note 10[94] Additional Liquidity Factors Discusses future liquidity needs, capital requirements, and potential financing strategies - Current cash balances are expected to be sufficient for liquidity needs for at least the next twelve months, based on current operations and backlog[95] - Long-term liquidity is contingent on future operating performance, meeting financial covenants, and the availability of additional financing[95] - The Company may require substantial additional capital for working capital, growth opportunities, joint ventures, international expansion, and acquisitions, potentially through equity or debt offerings[95][96] Cash Flows Analyzes the company's cash flows from operating, investing, and financing activities Summary of Cash Flow Activities (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Operating activities | $12,794 | $(25,322) | | Investing activities | $(330) | $(966) | | Financing activities | $(2,830) | $(295) | | Total net increase (decrease) in cash and cash equivalents | $9,634 | $(26,583) | - Net cash provided by operating activities in Q1 2025 was $12.8 million, a significant improvement from net cash used of $25.3 million in Q1 2024, driven by increases in accounts payable and customer deposits[98] - Net cash used in financing activities increased to $2.8 million in Q1 2025, primarily due to deferred financing costs ($1.3 million) and term loan repayments ($0.7 million)[100] Capital Expenditures Reports on current and projected capital expenditures for property, plant, and equipment Capital Expenditures (in millions) | Period | Capital Expenditures | | :----------------------------------- | :------------------- | | Three Months Ended March 31, 2025 | $0.3 | | Three Months Ended March 31, 2024 | $1.0 | - Capital expenditures decreased to $0.3 million in Q1 2025 from $1.0 million in Q1 2024[101] - Anticipated capital expenditures for 2025 are projected to be $5.0 million to $6.0 million, mainly for machinery and equipment enhancements at the Manufacturing Facility[101] - The company experienced a significant decrease in consolidated revenues (40.2% YoY) but an increase in gross profit (26.2% YoY) due to a favorable product mix[80][81] - Net income dramatically improved to $50.4 million in Q1 2025 from a net loss of $11.6 million in Q1 2024, largely driven by a $52.9 million gain on the change in fair market value of Warrant liability[85][87] - Operating cash flow turned positive, providing $12.8 million in Q1 2025, compared to using $25.3 million in Q1 2024, reflecting improved working capital management[98] Item 4. Controls and Procedures This section reports on the effectiveness of the company's disclosure controls and procedures and any changes in internal control over financial reporting Management's Report on Internal Control over Financial Reporting States management's conclusion on the effectiveness of disclosure controls and procedures - Management, including the principal executive and financial officers, concluded that the Company's disclosure controls and procedures were effective as of March 31, 2025[103] Changes in Internal Control Over Financial Reporting Reports on any material changes in the company's internal control over financial reporting - There have been no material changes in the Company's internal control over financial reporting during the quarter ended March 31, 2025[104] PART II – OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal, equity, and exhibit details Item 1. Legal Proceedings. This section refers to Note 16 for details on the company's legal proceedings and commitments - For information regarding legal proceedings, refer to Note 16 - Commitments and Contingencies[107] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. This section provides information on the company's purchases of its common stock during the three months ended March 31, 2025, primarily related to employee stock option exercises and restricted share vesting Purchases of Equity Securities by the Issuer (Q1 2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :----------------------------------- | :----------------------------- | :--------------------------- | | January 1 - 31, 2025 | 29,240 | $12.35 | | February 1 - 28, 2025 | 793 | $11.79 | | March 1 - 31, 2025 | 1,547 | $6.39 | | Total | 31,580 | $12.04 | - The purchases include shares surrendered by employees for stock option exercise prices and/or tax withholding obligations, and restricted shares withheld for tax withholding upon vesting[109] Item 3. Defaults Upon Senior Securities. This section states that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities were reported[110] Item 4. Mine Safety Disclosures. This section indicates that the disclosure requirements for mine safety are not applicable to the company - This item is not applicable to the Company[111] Item 5. Other Information. This section states that there is no other information to report under this item - No other information is reported under this item[112] Item 6. Exhibits. This section lists all exhibits filed as part of the Form 10-Q, including key agreements, certifications, and XBRL documents - Exhibits include the Loan and Security Agreement dated February 12, 2025, certifications of principal executive and financial officers (Sarbanes-Oxley Act of 2002), and various Inline XBRL documents[115][116] SIGNATURES This section contains the official signatures of the company's principal executive, financial, and accounting officers, certifying the accuracy of the report - The report was signed on May 5, 2025, by Nicholas J. Randall (President and CEO), Michael A. Riordan (VP, CFO, and Treasurer), and Juan Carlos Fuentes Sierra (Corporate Controller and Chief Accounting Officer)[120]